The future of capital raising in Asia: inside Crédit Agricole CIB’s client-centric solution offerings

Asia’s fixed income markets represent a pool of prospects in which investors can allocate capital to markets that are relatively isolated from global macroeconomic trends. These divergent monetary policies present a situation wherein market participants must navigate changes while capitalising on rising opportunities. Yet, with the right help, investors can still find returns and raise capital sustainably

John Luk, Crédit Agricole CIB

The global capital markets faced a tough year in 2022 and will most likely remain challenging throughout 2023. Despite this, Crédit Agricole CIB has proven to be a market leader in bridging issuers and investors worldwide with bespoke transactions. The French bank has a robust, regional network and has maintained a long-standing presence in Asia since 1875. It has also remained consistent as one of the top two bookrunning banks in the Hong Kong dollar and renminbi (RMB) bond markets, as well as a frequent champion for environmental, social and governance (ESG) financing solutions. 

Adapting to investor demand

Crédit Agricole recognises that, since the height of the Covid-19 pandemic, there have been demand shifts from Asian investors. Therefore, it has been constantly adapting solutions to cater to its clients’ changing needs.

In November 2022, a transaction with Shinhan Bank – the second-largest commercial bank in South Korea – underscored Crédit Agricole’s foreign currency financing capabilities beyond the US dollar and euro, where it acted as joint lead manager and bookrunner for a A$400 million (US$258 million) three-year floating-rate social kangaroo bond. 

This landmark transaction is Crédit Agricole’s first Australian dollar debt capital markets mandate with a South Korean issuer – a success for the firm amid growing volatility in the financial markets. 

“It acts as a powerful demonstration of how strong foreign exchange financing capabilities and an extensive platform can serve our clients; through solid relationships and marketing efforts, our Korean team were able to earn the trust of Shinhan’s management and award us this mandate,” says John Luk, head of emerging markets trading for Hong Kong at Crédit Agricole CIB.

Leading in RMB bond markets

As the Southbound Bond Connect makes trades more accessible, Crédit Agricole’s offshore RMB bond issuance size increased by more than 70% in 2022, compared with the previous year.

“We witnessed the increasing demand for RMB from clients over the years,” says Luk. “We are well-positioned in this trend of RMB gaining more use and recognition internationally.” He pointed to the inclusion of RMB bonds in the global bond benchmark indexes, alongside the International Monetary Fund lifting the yuan’s weighting in the Special Drawing Rights.

Crédit Agricole was one of the lead managers and bookrunners on the RMB5 billion, multi-tranche dim sum bond, issued by China’s Hainan province in October 2022. Hainan was the first mainland province to issue offshore bonds in Hong Kong, and this was the first-ever blue and sustainability bond delivered by a Chinese sovereign issuer. 

“We are committed to facilitating the opening-up of the China capital markets for RMB internationalisation,” says Gary Lo, head of offshore China trading at Crédit Agricole CIB. As of April 2022, Crédit Agricole book-ran a total of US$933 million in 15 deals for Greater China investment-grade sustainable bonds, taking 10.5% of the market share, according to Dealogic data.

The Swap Connect in 2023

Global monetary tightening is expected to continue until interest rate hikes ease off from historic highs of inflation. Along with the border reopening in mainland China, investors are eager to see the opportunities available in the world’s second-largest economy.

Crédit Agricole is a designated market-maker for the Bond Connect programme. Luk and Lo say that, for investors looking at the China market, the Southbound Bond Connect will continue to be the focus in 2023, as long as the yield difference between onshore and offshore remains. 

As China looks to launch Swap Connect in early 2023 – a scheme designed to help stabilise bond market development – institutional investors targeting the mainland will have access to the offshore interest rates swaps (IRS) market from Hong Kong, in addition to the Southbound Bond Connect, which was launched in September 2021. The programme will allow investors to exchange interest payments in the two Chinese on- and offshore currencies – CNH and CNY – through derivatives.

“Offshore investors were not allowed to access the onshore IRS market, and this will be the first time they can,” says Lo. “Volume is going to increase because we expect China rates will go up, as the mainland is reopening and expecting to experience steadier growth this year. With this in mind, the scheme is vital to further connect international investors to domestic markets.”

Mastering ESG solutions

RMB products aside, “we have a diverse cross-border platform to help international clients diversify their risk and expand their business in the Asia-Pacific region,” says Luk. “Through our expertise in Asia bond markets and sustainable banking, we have led credible and sustainable transactions for the world’s largest investors.”

In September 2022, the bank came up with a new “green on green” repo structure, facilitating the channelling of funds towards green development. The collateral consisted of green bonds and an equal amount of repo proceeds towards green purposes. These transactions also represent the first green repos to be traded under the China Foreign Exchange Trade System, creating a solid benchmark for the onshore green repo market.

“Crédit Agricole started the ESG initiative a long time ago,” says Luk. “We have had the ESG banking team since 2010 and a dedicated team in Asia to advise our clients on sustainable banking.” The bank was selected as one of the five cornerstone members in the Alliance for Green Commercial Banks, a global initiative established by the International Finance Corporation in June 2022. The alliance includes an Asia chapter co-launched with the Hong Kong Monetary Authority to develop a green community in emerging markets.

“It’s very difficult to foresee the economic outlook for 2023 – hence, why we think our clients will be increasingly active in hedging their interest rate or FX exposures during the coming year, and show interest in conducting their businesses more responsibly – an area in which we can definitely help,” says Luk.

About Crédit Agricole Corporate and Investment Bank

Crédit Agricole CIB is a pioneer in the area of climate finance and is currently a market leader in this segment, with a complete offer for all of its clients. For many years, Crédit Agricole has been committed to sustainable development, and was the first French bank to sign the Equator Principles in 2003. It has also been a pioneer in green bond markets with the arrangement of public transactions from 2012 for a wide array of issuers (supranational banks, corporates, local authorities and banks), and was one of the co-drafters of Green Bond Principles and of the Social Bond Guidance. Relying on the expertise of a dedicated sustainable banking team, and on the strong support of all bankers, Crédit Agricole is one of the most active banks in the green bonds market.

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